What is Cloud Manufacturing and Why Does it Matter

Industry 4.0, IoT, service-orientated tech; it’s often hard to cut through the noise and access the meaning of the many and various pieces of terminology floating around. One term which has been doing the rounds, especially on LinkedIn and tech Twitter in recent years, is ‘cloud manufacturing’.

What does it mean and why does it matter?

A good barometer for whether a new industry term has useful meaning is to imagine a five-year-old explaining it to her grandfather. If you think that’s possible, the term may have some usage.

So what is cloud manufacturing?

In basic terms, it describes a set of standards and systems (or a paradigm, if you’re being philosophical) that enable organisations to manufacture products remotely, using cloud technology.

Imagine you’re a manufacturer and you need 100 copper brackets. You might ring up your local supplier, discuss the order, confirm the details, fill out a purchase order form, wait for delivery, then pay your invoice.

During that process you’ll have almost zero visibility of your order. You’ll also not know whether you could have got the same product and service cheaper from elsewhere. Unless you had the time to gather quotes from other local suppliers, any value derived from shopping around would likely be eaten up by the time it took you to do it.

Cloud manufacturing works in a different way. In most cases, it facilitates remote manufacturing. Meaning, with the right understanding and approach, you could remove the need to go to a local supplier and simply place your order with the best value supplier at that time, regardless of where they are in the world.

Manufacturing prices are partially determined by plant capacity and availability. If a plant is at capacity, you’ll have to wait longer and will pay more due to increased demand. If a plant has available capacity using a cloud based approach, even for a short period of time, accessing that capacity will be comparatively cheap. That’s because manufacturers need their machinery and plants to be at as close to full capacity as is possible, for as long as possible.

Cloud manufacturing makes things cheaper and gets them to market quicker, by opening the global supply chain and making procurement decisions location agnostic.

This is how manufacturers were able to get facemasks, personal protective equipment and even fully finished ventilators to market in a matter of weeks during the early stages of the COVID-19 pandemic.

Of course, none of this can work without the tech that underpins it. Without the tech, manufacturers and suppliers can communicate, receive orders and share design and specifications.

Who supplies the tech?

That depends on what you’re looking to achieve.

Robert Henzel is a PHD student based at the University of Stuttgart in Germany. He is writing his doctoral thesis on the subject of cloud manufacturing and has analysed three businesses in cloud manufacturing to understand the prospects for the emerging sector.

“The manufacturing industry has been evolving for decades. Considering the established production paradigms – theories of how to produce something – it’s easy to see how our priorities have changed. It started with the cost driver, otherwise known as the drive to reduce costs, in 1910.Then came the volume driver in about 1925, and in 1990 the quest for variety in” explains Robert.

Summarising the advantages of cloud manufacturing, Robert is succinct.

“The advantage is threefold; elimination of administrative work within manufacturing, higher machine utilization rate, market entry for SMEs.”

To gain a fuller understanding, Robert analysed the approaches of Techpilot, 24/7 Tailor Steel and Fractory, paying particular attention to businesses model, customer flow and scalability.

The analysis brought Robert to the conclusion that not owning machines is a distinct advantage for tech providers in the cloud manufacturing space. Both Techpilot and Fractory are unburdened with the cost of running and maintaining machines. In the same way Uber owns no cars and Airbnb owns no property, the cloud manufacturing businesses with greatest potential are likely to be tech pureplayers connecting customers with suppliers and – in the case of Fractory especially – managing and facilitating relationships.

Robert concludes:

With their role as caretaker, Fractory facilitates the order, checks the final quality and and oversees shipping. Because of this the potential for scalability is obvious, as Fractory is able to simply integrate more providers and customers.”


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